My previous column provided an overview of a recent Senate Banking Committee hearing titled How Private Equity Landlords are Changing the Housing Market. It argued, as I did in my testimony, that private equity investors have not harmed the housing market.

If anything, they’ve helped the housing market, a view shared by even the left-leaning Urban Institute.

That post – Part 1 of a short series – briefly covered the infamous Schumark that sends an extra $40 billion to New York City’s public housing authority, and most of the other failed housing policies that the Democrats are pushing in the reconciliation bill. This post – Part 2 – delves deeper into the problems with these ineffective policies.

It starts where Senator Sherrod Brown (D‑OH) ended the hearing, arguing against the idea that work requirements can be a beneficial component to welfare transfers. He noted (at the 1:57 mark) that:

The idea that someone who has low income has some kind of pathology, where they wouldn’t want to work to make more money all because they got a $300 a month tax cut….it’s pretty ridiculous and, frankly, saying that they don’t want to work is pretty offensive.

Of course, nobody at the hearing said that lower income earners have any kind of pathological problem, much less one like Brown suggested. And Brown was the one who brought up the $300 per month tax cut.

What several Republican members did bring up, however, was the fact that the reconciliation bill is going to dramatically increase welfare transfer payments without any sort of work requirements, thus expanding an open-ended transfer system. Work requirements, first instituted in 1996, were successful precisely because they placed some limits on that transfer system.

The problem with these transfers is not that recipients have some kind of strange pathology, it’s that they are normal human beings. That is, if you pay anyone enough to work less, that’s what they’ll do.

Senator Brown’s $300 per month tax cut is a straw man in more ways than one.

The U.S. welfare system writ large, and many specific pieces of it, such as the Section 8 rental assistance that the Democrats want to triple, undermines the American way of life. Overall, this transfer system has not helped people climb the economic ladder and work their way into the middle class (or higher).

Using that metric, these transfers have been an utter failure. They have nominally brought many people just past the (ever increasing) official poverty line, but they have helped create long-term dependence on government transfers.

And the blame does not lie with the recipients. Just look at the broader economic incentives.

On average, means-tested transfers now boost income for some in the lowest income quintile by more than 66 percent. A Pennsylvania Department of Welfare study puts these disincentives in stark terms: “The single mom is better off earning gross income of $29,000 with $57,327 in net income and benefits [from transfers] than to earn gross income of $69,000 with net income and benefits of $57,045.”

The Pennsylvania case is not isolated. These kinds of harmful incentives are baked into the earned income tax credit (EITC), the nation’s second-largest means-tested cash welfare program, and many other so-called social safety net programs.

As recipients move up on the income scale, poverty benefits have to be reduced. Eventually, when income is high enough, they have to be taken away. As many researchers have shown, this feature creates a potential poverty trap.

One study shows that for people near the top (the 75th percentile) of the lowest income quintile, depending on age, marginal tax rates range from 67.4 percent to 76.5 percent. In other words, as means-tested benefits phase out, earning an additional $1,000 provides three times more to the government than to the worker.

Similar research has shown that benefit reductions combined with higher income and payroll taxes can raise marginal rates for some workers to 95 percent. (For additional studies, click here, here, and here).

For most people down on their luck, overcoming these kinds of incentives is incredibly difficult. It is not easy to work up the proverbial income ladder, so it is hardly surprising that federal surveys show “three quarters of the decline in prime-age male labor-force participation has involved men who say they do not want a job.” [Emphasis added.]

Again, this fact is in no way a jab at poor people. As Scott Winship points out, “Labor-force participation has been falling among prime-age men since the 1930s — through the strong labor markets of the 1940s, 1950s, and 1960s. It has fallen among college-educated male workers too.” [Emphasis added.]

The larger Congress makes these transfers, the worse these incentives will become. At the same time, more people will have to pay higher taxes to fund the transfers.

That’s obviously not a sustainable system, and it is likely why so many Democrats are uncomfortable acknowledging this problem.

That discomfort was on display Tuesday, in an exchange between senator John Kennedy (R‑LA) and HUD nominee Elizabeth de Leon Bhargava. Kennedy asked Bhargava whether able-bodied adults, under 55 and without children, should be required to work before receiving taxpayer assistance from HUD.

As the video shows, Bhargava would not—or could not—answer Kennedy’s question.

And Kennedy didn’t even push on the sticky issues, such as whether Section 8 rental vouchers have encouraged long-term dependency or performed about as poorly as project-based housing.

Any objective observer can see what is plainly obvious: Since the 1960s, the United States has been trying to eradicate poverty by increasingly redistributing more income, but these transfer programs have miserably failed most of their recipients.

They have not provided a push to join the middle class. For millions of Americans, it is a shame that Congress continues to debate this fact.

It is also too bad that Congress continues to debate the best way to help as many people as possible generate as much wealth as they can. Objectively, the answer is to foster free markets – free trade, free movement of goods and people within the rule of law, individual liberty and freedom with a government that protects life, liberty, and property.

Without a doubt, history shows that this is the way to accomplish such a goal.

Redistributing wealth and forcing people to make economic decisions based on the subjective opinions of a ruling class—whether it’s called socialism, fascism, populism, or a social safety net—does not produce widespread wealth. But it does enrich the ruling class.